Correlation Between Long Giang and Century Synthetic

Can any of the company-specific risk be diversified away by investing in both Long Giang and Century Synthetic at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Long Giang and Century Synthetic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Long Giang Investment and Century Synthetic Fiber, you can compare the effects of market volatilities on Long Giang and Century Synthetic and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Long Giang with a short position of Century Synthetic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Giang and Century Synthetic.

Diversification Opportunities for Long Giang and Century Synthetic

0.19

Correlation Coefficient

Long Giang  Century Synthetic

Average diversification

The 3 months correlation between Long and Century is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Long Giang Investment and Century Synthetic Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Synthetic Fiber and Long Giang is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Long Giang Investment are associated (or correlated) with Century Synthetic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Synthetic Fiber has no effect on the direction of Long Giang i.e., Long Giang and Century Synthetic go up and down completely randomly.

Pair Corralation between Long Giang and Century Synthetic

Assuming the 90 days trading horizon Long Giang Investment is expected to generate 1.36 times more return on investment than Century Synthetic. However, Long Giang is 1.36 times more volatile than Century Synthetic Fiber. It trades about -0.04 of its potential returns per unit of risk. Century Synthetic Fiber is currently generating about -0.22 per unit of risk. If you would invest  249,000  in Long Giang Investment on October 23, 2024 and sell it today you would lose (9,000) from holding Long Giang Investment or give up 3.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Long Giang Investment  vs.  Century Synthetic Fiber

Long Giang Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Long Giang Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Long Giang is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Century Synthetic Fiber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Synthetic Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward-looking signals remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Long Giang and Century Synthetic

The main advantage of trading using opposite Long Giang and Century Synthetic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long Giang position performs unexpectedly, Century Synthetic can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Century Synthetic will offset losses from the drop in Century Synthetic's long position.

The idea behind Long Giang Investment and Century Synthetic Fiber pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.